Wells Fargo Bank, N.A. v. PT Dume Shopping Center, LLC et al

Filing 46

Memorandum Opinion and Order: To the extent plaintiff's motion for judgment on the pleadings (Doc. No. 29 ) seeks judgment on the pleadings with respect to the fourth and fifth causes of action in the Canton Action, it is denied. That s aid, the Court notes that plaintiff will not be precluded from seeking summary judgment on these and the other remaining claims at such time as that may be appropriate. In all other respects, the motion is granted in accordance with the Consent Judgm ent and the Order of Confirmation of Sales and Distribution filed contemporaneously herewith. The Court will conduct a telephone conference, with counsel only, on January 26, 2017 at 1:00 p.m. to discuss case management going forward. Plaintiff' s counsel shall initiate the phone call, and join the Court at 330-252-6060 after all counsel are on the line. Counsel shall confer and, by January 23, 2017, shall file their suggestions as to a case management plan, based on what remains for resolution in the three cases. (Related Doc # 32 , 45 ). Judge Sara Lioi on 1/5/2017. (P,J)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

WELLS FARGO BANK, N.A., AS TRUSTEE
FOR THE REGISTERED HOLDERS OF
DEUTSCHE MORTGAGE & ASSET
RECEIVING CORPORATION, COMM 2005-C6,
COMMERCIAL MORTGAGE PASS THROUGH
CERTIFICATES,
Plaintiff,
vs.
PT. DUME SHOPPING CENTER, LLC, et al.,
Defendants.

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WELLS FARGO BANK, N.A., AS TRUSTEE
FOR THE REGISTERED HOLDERS OF
DEUTSCHE MORTGAGE & ASSET
RECEIVING CORPORATION, COMM 2005-C6,
COMMERCIAL MORTGAGE PASS THROUGH
CERTIFICATES,
Plaintiff,
vs.
PT. DUME SHOPPING CENTER, LLC,
Defendant.

Plaintiff,
vs.
PT. DUME SHOPPING CENTER, LLC,
Defendant.

[the “Canton Action”]
JUDGE SARA LIOI

MEMORANDUM OPINION
AND ORDER

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WELLS FARGO BANK, N.A., AS TRUSTEE
FOR THE REGISTERED HOLDERS OF
DEUTSCHE MORTGAGE & ASSET
RECEIVING CORPORATION, COMM 2005-C6,
COMMERCIAL MORTGAGE PASS THROUGH
CERTIFICATES,

CASE NO. 5:16-cv-00044

CASE NO. 4:16-cv-00048
[the “Boardman Action”]
JUDGE SARA LIOI

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CASE NO. 1:16-cv-00050
[the “Mentor Action”]
JUDGE SARA LIOI

Before the Court is plaintiff’s motion for judgment on the pleadings. (Doc. No. 29
[“Mot.”].) Defendants filed a memorandum in opposition (Doc. No. 30 [“Opp’n”]),1 and plaintiff
filed a reply (Doc. No. 31 [“Reply”]). For the reasons set forth herein, plaintiff’s motion is
granted in part and denied in part.
I. BACKGROUND
On January 8, 2016, plaintiff Wells Fargo Bank, N.A., as trustee (“plaintiff”), filed the
above-captioned complaints in foreclosure. They were consolidated on March 25, 2016. On
April 21, 2016, by stipulated order, a receiver was appointed.
In Case No. 5:16-cv-00044 (the “Canton Action”), plaintiff names three defendants: Pt.
Dume Shopping Center, LLC (“defendant Borrower”), Jerry L. Preston, as Trustee of the Preston
Family Trust (the “Preston Trust”), and Jerry L. Preston, individually (“Preston”) (collectively,
the “defendants”).
The Canton Action alleges that, on or about May 9, 2005, plaintiff’s predecessor2 made a
loan to defendant Borrower in the principal amount of $4,175,000.00, pursuant to the terms and
conditions of a promissory note of the same date. (Compl. ¶ 8.)3 To secure payment of the note,
defendant Borrower executed a mortgage on premises located at 4824 Whipple Ave NW,
Canton, OH 44512 (the “Canton Mortgaged Premises”), along with other agreements outlined in
the complaint (id. ¶¶ 9-12),4 and also granted a security interest in personal property that was
1

Defendants also filed a motion for oral argument. (Doc. No. 32.) In view of the ruling on plaintiff’s motion for
judgment on the pleadings, oral argument is not necessary. Therefore, Doc. No. 32 is denied.
2

Plaintiff is the successor by assignment to PNC Bank, N.A., the original lender, in connection with the note and
mortgage at issue. (Complaint, Doc. No. 1 [“Compl.”] ¶ 2.)
3

Copies of all relevant documents are attached as exhibits to the complaint. The Court may take these documents
into account without converting the instant motion into one for summary judgment because the documents “are
referred to in the complaint and are central to the claims contained therein[.]” Gavitt v. Born, 835 F.3d 623, 640 (6th
Cir. 2016) (citations omitted).
4

These agreements were amended on September 4, 2007 and thereafter recorded. (Compl. ¶ 17.)

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fully identified in recorded UCC Financing Statements. (Id. ¶ 13.) Plaintiff, defendant Borrower,
Preston and the Preston Trust (Preston and the Preston Trust, collectively, the “Guarantor
Defendants”) entered into a non-recourse indemnification agreement dated May 9, 2005. (Id. ¶
14.) The Canton Mortgaged Premises, along with all other collateral pledged as security under
the documents evidencing the loan are collectively referred to as the “Canton Mortgaged
Property.” Plaintiff is the current holder of the note and mortgage. (Id. ¶ 21.)
Plaintiff alleges that defendants defaulted on the loan and otherwise breached some or all
of the various agreements. The Canton Action sets forth six causes of action: (1) mortgage
foreclosure; (2) breach of promissory note; (3) breach of lockbox agreement; (4) breach of
assignment of leases and rents for termination payment; (5) breach of assignment of leases and
rents for loss of property value; and (6) fraud and misrepresentation.
The Boardman Action (Case No. 4:16-cv-00048) and the Mentor Action (Case No. 1:16cv-00050) are based on similar allegations with respect to other mortgaged premises. 5 Each of
those complaints set forth three causes of action against defendant Borrower only: (1) breach of
promissory note; (2) breach of lockbox agreement; and (3) mortgage foreclosure.
On July 25, 2016, the first two claims in the Canton Action were resolved by way of a
stipulated, and approved, Consent Judgment in Mortgage Foreclosure. (See Doc. No. 36.)6 A
receiver sale was conducted and the Court confirmed that sale for each of the subject mortgaged
premises. (See Doc. No. 45.) Plaintiff has expressly reserved the third and sixth causes of action

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The mortgaged premises in the Boardman Action are located at 317 Boardman Poland Road, Boardman, OH
44512. (See Boardman Action Complaint ¶ 8.) The mortgaged premises in the Mentor Action are located at 7721
Mentor Avenue, Mentor, OH. (See Mentor Action Complaint ¶ 8.)
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The Consent Judgment also resolved the counterpart claims (Counts 1 and 3) in both the Boardman Action and the
Mentor Action.

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for resolution on summary judgment.7 The fourth and fifth causes of action are the subject of the
current motion for judgment on the pleadings.8
II. DISCUSSION
A.

Legal Standard
On a motion for judgment on the pleadings under Fed. R. Civ. P. 12(c), a court applies

the same standard as on a Rule 12(b)(6) motion to dismiss for failure to state a claim. Tucker v.
Middleburg-Legacy Place, LLC, 539 F.3d 545, 549 (6th Cir. 2008). “‘For purposes of a motion
for judgment on the pleadings, all well-pleaded material allegations of the pleadings of the
opposing party must be taken as true, and the motion may be granted only if the moving party is
nevertheless clearly entitled to judgment.’” Id. (quoting JPMorgan Chase Bank, N.A. v. Winget,
510 F.3d 577, 581 (6th Cir. 2007)). “In particular, when a plaintiff moves for judgment on the
pleadings, the motion should be granted if, ‘on the undenied facts alleged in the complaint and
assuming as true all the material allegations of fact in the answer, the plaintiff is entitled to
judgment as a matter of law.’” Forgues v. Select Portfolio Servicing, Inc., No. 1:15-CV-1670,
2016 WL 543186, at *1 (N.D. Ohio Feb. 10, 2016) (quoting Lowden v. Cnty. of Clare, 709 F.
Supp. 2d 540, 546 (E.D. Mich. 2010)) (emphasis added by Forgues).
B.

Analysis
At the time plaintiff’s motion for judgment on the pleadings was filed, the parties had not

yet entered into their consent judgment, there had been no foreclosure sale, and the Court had not
yet been presented with a proposed order of confirmation for its approval. All those events have
since occurred. As a result, all that remains for resolution as to the pending motion is a
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The counterpart claim (Count 2) in both the Boardman Action and the Mentor Action is similarly reserved. There
is no sixth cause of action in either of those complaints.
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There are no counterpart fourth or fifth causes of action in the Boardman Action or the Mentor Action.

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determination of whether plaintiff is entitled to judgment on the pleadings as to the fourth and
fifth causes of action in the Canton Action.
Plaintiff asserts, based on allegations in ¶ 25 of the Canton Action, that the three
defendants breached the Canton Lease Assignment by granting a tenant (Petco) early termination
of its lease, without plaintiff’s consent, without requiring full payment of the balance of the rents
due on the tenant’s lease, and without remitting the $1,000,000.00 transfer payment to plaintiff.
In full, ¶ 25 alleges:
25.
On or about February 14, 2014, and without Plaintiff’s knowledge
or consent, Defendant Borrower agreed to an early termination (the “Petco Early
Lease Termination”) of its lease (the “Petco Lease”) at the Property with Petco
Animal Supplies Stores, Inc. (“Petco”). Attached hereto as Exhibit I is a copy of a
Termination of Lease and Release Agreement (the “Termination Agreement”)
between Defendant Borrower and Petco. The term of the Petco Lease was not
scheduled to end until October 1, 2018, and the rent (the “Petco Rent”) due under
the Petco Lease through the end of the term of that lease was $2,129,870.96. As is
evidenced by the Termination Agreement, and notwithstanding the fact that
$2,129,870.96 remained due under the Petco Lease through the end of the term of
the Petco Lease, Defendant Borrower agreed to and accepted the sum of
$1,000,000.00 as a ‘Termination Payment’, as defined in the Termination
Agreement, and in ‘full satisfaction of all amounts due to Landlord from [Petco]
in connection with the [Petco] Lease. In the Termination Agreement, Defendant
Borrower also falsely and with malice aforethought, represented and warranted to
Petco, to Plaintiff’s detriment, that ‘… (i) there is no trust deed or mortgage
encumbering the [P]roperty, (ii) there is no Lender with any lien on the [P]roperty
… who may have an interest in the termination of the Lease, (iii) that no lender’s
consent or other third parties’ prior written consent to the within termination of
the Lease are required before terminating the Lease … . “Moreover, in early
2015, Defendant Borrower provided Plaintiff with a yearend 2014 operating
statement, in which it failed to disclose its receipt of the Termination Payment. In
light of the foregoing, Defendant Borrower is further in default (the “Recourse
Defaults”) of its obligations under the Loan Documents for its (a) failure to seek
and obtain Plaintiff’s consent before agreeing to terminate Petco Lease for the
Mortgaged Premises before the end of the term of the Petco Lease; (b) its having
made material and fraudulent misrepresentations in the Termination Agreement it
signed with Petco to Plaintiff’s detriment; (c) its having received from Petco the
Termination Payment of $1,000,000.00 on account of rent due under the Petco
Lease without remitting the Early Termination Rental Payment to Plaintiff; and
(d) its having deprived Plaintiff of its collateral in the form of rent due and owing
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under the Petco Lease for the full term of the Petco Lease, or at least for the
period of the term of the Petco Lease co-incident with the time that Plaintiff has
an [sic] security interest in the rents generated from the Petco Lease and, beyond
that, for any period of time following the conclusion of this foreclosure action
during which Plaintiff owns the Mortgaged Premises; and (e) its having made
material and fraudulent misrepresentations to Plaintiff in its year end 2014
financial reporting.
Plaintiff argues in its motion that defendants “do not dispute” the allegations in ¶ 25 of
the Canton Action, relying upon defendants’ admission that all the documents speak for
themselves. (Mot. at 702.)9 It is plaintiff’s position that defendants “undisputedly admits [sic]
that [they] cause [sic] damages in the amount of $2,129,870.96, and with held [sic] the
$1,000,000.00 Termination Payment from [plaintiff].” (Id. at 703, citing ¶ 25.)
In fact, in their answer to ¶ 25 of the Canton Action, the three defendants stated:
25.
Answering Defendants state that any document referred to in
Paragraph 25 of Plaintiff’s Complaint speaks for itself. To the extent that any
allegations are made within Paragraph 25, same are denied leaving Plaintiff
to its strict proofs.
(Answer, Doc. No. 19, emphasis added.) Defendants, therefore, argue in opposition to the motion
that they “unambiguously denied the allegations of Paragraph 25[,]” and that plaintiff “includes a
tortured reading of Defendants’ Answer within its Motion.” (Opp’n at 725.) Defendants “do not
deny that the portion of the documents quoted … state what Plaintiff represents[,]” but
defendants “unequivocally deny that the documents are to be read into, construed, inferred
and/or interpreted – both factually and legally – as Plaintiff has represented and concluded
within its Complaint and its Motion.” (Id., emphasis in original.)
Moreover, defendants point out that they have uniformly denied all the allegations in the
paragraphs of the complaint that make up the actual fourth and fifth causes of action. Defendants
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All page number references are to the page identification number generated by the Court’s electronic docketing
system.

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argue: “Surprisingly, Plaintiffs [sic] cite to Defendants’ Answer to Paragraphs 46-52 and 53-59,
in addition to Paragraph 25, as further support that Defendants have ‘admitted’ that they have
breached the Assignment of Leases and Rents. (Motion, pp. 17-18).” (Opp’n at 727.) But this is
incorrect; plaintiff’s paragraph citations are all to the “Canton Compl.” and not to any answer.
What is true, however, is that plaintiff has only cited to the complaint, and has completely
ignored the denials in the counterpart paragraphs of the answer. Plaintiff asserts that the factual
allegations must be construed in its favor. (Mot. at 703, citing BAC Home Loans Servicing LP v.
Fall Oaks Farm LLC, No. 2:11-cv-274, 2013 WL 271793, at *1 (S.D. Ohio Jan. 24, 2013)). But
in Fall Oaks, the Rule 12(c) motion was made by a third-party defendant. The court properly
construed the facts in the plaintiff’s favor, since plaintiff was the non-movant. That is not the
case here. As pointed out in Forgues, supra, “the motion should be granted if, ‘on the undenied
facts alleged in the complaint and assuming as true all the material allegations of fact in the
answer, the plaintiff is entitled to judgment as a matter of law.’” (emphasis in original). See also,
Tucker, supra.
It is not, as plaintiff seems to argue, a simple matter of giving legal effect to the various
contracts and agreements attached to the complaint. There are disputed factual matters in ¶ 25 of
the complaint that must be established by way of evidence, including, at the very least, that: (1)
defendant terminated Petco’s lease “without Plaintiff’s knowledge or consent[;]” (2) “[t]he term
of the Petco Lease was not scheduled to end until October 1, 2018, and the rent (the “Petco
Rent”) due under the Petco Lease through the end of the term of that lease was $2,129,870.96[;]”
and, (3) defendant Borrower “falsely and with malice aforethought, represented and warranted to
Petco, to Plaintiff’s detriment, that ‘… (i) there is no trust deed or mortgage encumbering the
[P]roperty, (ii) there is no Lender with any lien on the [P]roperty … who may have an interest in
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the termination of the Lease, (iii) that no lender’s consent or other third parties’ prior written
consent to the within termination of the Lease are required before terminating the Lease.” This
Court cannot simply overlook defendants’ denial of all of these allegations.
In summary, it is premature on the record currently before this Court to conclude that
plaintiff is entitled to judgment on the pleadings.
III. CONCLUSION
For the reasons set forth herein, to the extent plaintiff’s motion (Doc. No. 29) seeks
judgment on the pleadings with respect to the fourth and fifth causes of action in the Canton
Action, it is denied. That said, the Court notes that plaintiff will not be precluded from seeking
summary judgment on these and the other remaining claims at such time as that may be
appropriate. In all other respects, the motion is granted in accordance with the Consent Judgment
and the Order of Confirmation of Sales and Distribution filed contemporaneously herewith.

IV. SUBSEQUENT PROCEEDINGS
The Court will conduct a telephone conference, with counsel only, on January 26, 2017 at
1:00 p.m. to discuss case management going forward. Plaintiff’s counsel shall initiate the phone
call, and join the Court at 330-252-6060 after all counsel are on the line.
Counsel shall confer and, by January 23, 2017, shall file their suggestions as to a case
management plan, based on what remains for resolution in the three cases.
IT IS SO ORDERED.
Dated: January 5, 2017
HONORABLE SARA LIOI
UNITED STATES DISTRICT JUDGE

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